The Impact of Insider Trading on Forecasting in a Bookmakers' Horse Betting Market
AbstractThis paper uses a new variable based on estimates of insider trading to forecast the outcome of horse races. We base our analysis on Schnytzer, Lamers and Makropoulou (2008) who showed that inside trading in the 1997-1998 Australian racetrack betting market represents somewhere between 20 and 30 percent of all trading in this market. They show that the presence of insiders leads opening prices to deviate from true winning probabilities. Under these circumstances, forecasting of race outcomes should take into account an estimate of the extent of insider trading per horse. We show that the added value of this new variable for profitable betting is sufficient to reduce the losses when only prices are taken into account. Since the only variables taken into account in either Schnytzer, Lamers and Makropoulou (2008) or this paper are price data, this is tantamount to a demonstration that the market is, in practice, weak-form efficient.
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Bibliographic InfoPaper provided by Department of Economics, Bar-Ilan University in its series Working Papers with number 2011-14.
Date of creation: Mar 2011
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Other versions of this item:
- Schnytzer, Adi & Lamers, Martien & Makropoulou, Vasiliki, 2010. "The impact of insider trading on forecasting in a bookmakers' horse betting market," International Journal of Forecasting, Elsevier, vol. 26(3), pages 537-542, July.
- A. Schnytzer & M. Lamers & V. Makropoulou, 2009. "The Impact of Insider Trading on Forecasting in a Bookmakers' Horse Betting Market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/627, Ghent University, Faculty of Economics and Business Administration.
- Adi Schnytzer & Martien Lamers & Vasiliki Makropoulou, 2009. "The Impact of Insider Trading on Forecasting in a Bookmakers' Horse Betting Market," Working Papers 2009-11, Department of Economics, Bar-Ilan University.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adi Schnytzer & Martien Lamers & Vasiliki Makropoulou, 2010.
"Measuring the Extent of Inside Trading in Horse Betting Markets,"
Journal of Gambling Business and Economics,
University of Buckingham Press, vol. 4(2), pages 21-41, September.
- Adi Schnytzer & Martien Lamers & Vasiliki Makropoulou, 2009. "Measuring the Extent of Inside Trading in Horse Betting Markets," Working Papers 2009-10, Department of Economics, Bar-Ilan University.
- Shin, Hyun Song, 1991. "Optimal Betting Odds against Insider Traders," Economic Journal, Royal Economic Society, vol. 101(408), pages 1179-85, September.
- Shin, Hyun Song, 1992. "Prices of State Contingent Claims with Insider Traders, and the Favourite-Longshot Bias," Economic Journal, Royal Economic Society, vol. 102(411), pages 426-35, March.
- Schnytzer, Adi & Shilony, Yuval, 1995. "Inside Information in a Betting Market," Economic Journal, Royal Economic Society, vol. 105(431), pages 963-71, July.
- Adi Schnytzer & Avichai Snir, 2008. "Herding in Imperfect Betting Markets with Inside Traders," Journal of Gambling Business and Economics, University of Buckingham Press, vol. 2(2), pages 1-15, September.
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